Wells Fargo says Dell stock ‘pressure overdone’, flags AI server momentum

Wells Fargo analysts believe the recent pressure on Dell Technologies (NYSE:)’ stock is “overdone,” referring to the 15% sell-off in the stock following the company’s latest earnings report.

The investment bank highlighted that momentum in Dell’s AI server segment remains strong, with the division showing significant growth in backlog, orders, and revenue. Specifically, Dell’s AI server backlog increased to $3.8 billion from $2.9 billion in the previous quarter, with orders rising to $2.6 billion and revenue reaching $1.7 billion.

Furthermore, analysts note that while Infrastructure Solutions Group’s (ISG) EBIT percentage has declined, the AI servers remain a margin-accretive business.

Thus, Wells Fargo reiterated an Overweight rating on DELL stock and raised the target price to $175 from $170, citing the company’s ability to leverage its capital structure and free cash flow generation as competitive advantages.

The company raised its fiscal 2025 revenue to be between $93.5 billion and $97.5 billion, with non-GAAP EPS expected to be $7.40 to $7.90.

Meanwhile, Morgan Stanley analysts also shared bullish views on the stock, despite near-term profitability issues.

The Wall Street giant pointed to Dell’s continued strength in the AI server market, noting that AI server revenues and orders exceeded expectations. Morgan Stanley also increased their fiscal 2026 EPS forecast to $10.34, driven by the growing AI ecosystem momentum.

Morgan Stanley attributes Dell’s recent stock decline to the market’s reaction to mixed first-quarter results, particularly the weak ISG margins.

“The glaring blemish in the quarter – in our view – was the weak ISG margin performance, as DELL added $1.6b of ISG revenue Y/Y at roughly zero profitability,” Morgan Stanley analysts said.

“However, this was not a function of AI server margin compression, and instead primarily near-term Storage mis-execution/underperformance, which we believe can be corrected, especially as the storage business recovers in F2H,” they added.